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Institution of Learning

Institution of Learning


To pay sales employees and make compensation efficient, it is possible to employ different compensation plans. It is necessary to combine them wisely to achieve the desired outcome in a form of high performance presented by sales team. Different compensation plans that the management can apply to satisfy the needs of sales people include salary plan, commission plan, and combination of both. Salary plan allows to control behavior of employees, because they receive their pay only if they fulfill the requirements of a company they work for. Thus, reasonable salaries stimulate employees to produce results and adhere to the company's policies as well as professional ethics. However, such method of remuneration has some disadvantages, because it is often based on seniority and does not consider performance of employees. Moreover, such plan cannot be universally applicable in all industries and is efficient mostly for trainees and seasonal sales.

Commission plan allows to control the outcome of sales personnel’s work, because their income depends directly on the results of their efforts. Thus, sales people have an incentive to work better and boost their productivity in terms of sales in order to gain different bonuses. Moreover, due to this compensation plan, companies can save costs in the period when sales are low. The leadership may also provide commissions in a monetary form as well as in a form of other benefits. Financial rewards can positively affect employees, because they are interested in better work and higher sales results. However, this plan also has some drawbacks that require additional attention. It is relatively difficult to administrate, since any bonuses should be properly calculated and correspond to performance of employees. Moreover, commissions plan can lower loyalty of sales people to their company. In fact, this bonus system seems more appropriate for such industries as wholesaling as well as automotive and real estate insurance.

In modern business environment, many sales organizations try to combine both plans to secure maximum benefits from using them to motivate their sales people. Due to a combination of these two strategies, sales employees can frequently receive rewards based on their productivity. Thus, they have the necessary motivation to realize their potential, which also encourages unproven recruits to work harder. Nevertheless, the combination of the two types of compensation plans has its disadvantages, because it is laborious to administrate, as there should be a separate person responsible for its effective implementation. Nevertheless, this compensation plan is the most common remuneration system, which is also applicable to almost all industries.

To design the most efficient compensation plan for their firm, managers should consider various aspects, such as dynamics of sales, the peculiarities of the industry, efficiency of employee’s work, etc. Additionally, to properly motivate sales personnel, it is recommended to combine financial incentives (compensation plans and other kinds of remuneration) and nonfinancial bonuses. As for nonfinancial incentives, they can be of different types, such as merchandise rewards, travel or entertainment certificates, status rewards, and promotion opportunities (Caballero, 1988). Merchandize rewards include different discounts on items that the company sells for sales people, entertainment benefits presuppose travelling to a particular destination, status rewards provide acquisition of a certain status (i.e. club membership), and promotion opportunity enables an upgrade of the position, which potentially involves publicity and other benefits. If combined with compensation plans, nonfinancial incentives can provide a more powerful stimulus for sales people and lead to higher sales results for the company. Nevertheless, financial and nonfinancial incentives should remain relatively simple to administrate and clear for the sales personnel.

When introducing any compensation plan, it is advisable to consider prospective risks. Particularly, it is necessary to control the process of implementation of financial incentives properly to discourage different forms of cheating to gain bonuses. As the amount of compensation grows, employees become more motivated to work productively.. However, higher benefits require an appropriate level of managerial control to ensure impartiality and equality. Moreover, the planning of compensation strategies should entail a thorough analysis of the expenditures of the company (i.e. fixed costs) in order not to overspend its budget. This article was written by Jeff Kip . More my works you can see here ppt poster recomended to use it!

Created: Apr 7 · Admin: jeffkip



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    Institution of LearningCompensationTo pay sales employees and make compensation efficient, it is possible to employ different compensation plans. It i...
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